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Terrible employment numbers

December 6, 2008 12:01 pmDecember 6, 2008 12:01 pm

A slump, a weak recovery, a worse slump

Most commentary on the terrible employment report has focused on the establishment numbers, because the number from the household survey that usually makes headlines, the unemployment rate, didn’t rise all that much. But the jobs picture from the establishment survey looks terrible, too; what held the unemployment rate down was a reduction in the number of people who said they were looking for work.

The chart above shows the employment-population ratio, the ratio of employed Americans to the adult population. By this measure it’s been a weak economy all along — and now it’s falling off a cliff.

This looks more like what we’ve been experiencing for all these years – I would like to see this same index back to 1980, as I think it would reflect the true employment picture for the average person in this country since the “Reagan Revolution” started transferring our labor into the top’s stolen wealth.

Excellent graph of what actual is going on with unemployment. Thanks, Paul.
Some people on the talk shows like to point to the unemployment figure announced at the beginning of each month as the real number of what’s going on. Hope they see this graph.
This is pathetic!

I’m not sure if certain people are factored out of this statistic, so what impact will retiring baby boomers have on the civilian employment ratio? It seems like it may have risen from about 56% in 1960 to almost 65% in 2000 because of an increasing number of women working, and because of a larger percentage of civilians being working age. With baby boomers retiring, is it fair to expect some decrease in the overall percentage? If so, that’s still not a good sign for the economy, and it’s a reminder that there may be more to worry about in the coming years (Social Security, etc) than just the auto industry, Wall Street, and unemployment.

Thanks for this. As one of those who never went back to work after the last recession, I do appreciate not being forgotten… fortunately we still do well, hubby’s income is great. But I am tired of paying a laid-off friend’s care loan right now…. he’s been out of work for over a year in L.A., where of course one cannot really look for work even without a car. I’ve been really tired of everyone saying how great the economy was over the last few years, it was not, and this chart shows why.

Come come, Dr. Krugman. By only displaying such a small portion of the y axis, your graph exagerates the magnitude of the change and makes it appear as though employment is plunging to 0. It would be more honest to show the full y axis, which would display this significant decline in employment more honestly.

“The chart above shows the employment-population ratio, the ratio of employed Americans to the adult population. By this measure it’s been a weak economy all along — and now it’s falling off a cliff.”

Economists need to do more talking to the people on the street, Dr. Krugman. I’ve been banging that drum for years, but consistently got the response that the economy was strong. For many of us, the economy has been falling off the cliff all along. It’s just more widespread now and has gained the recognition of those at the top of the food chain.

I was interested to see how bad historically this was .. so I looked at the data since I was born: expressed as percentage of total workforce, this loss of jobs ranks 5th after Nov & Dec 1974, Feb 1975 (when we lost over 1.5M jobs in 4 months) and May 1980. In all, from the data BLS publishes (from 1948), it is not even in the top 30.
Serious stuff (2nd worst since Reagan era began) … but definitely not unprecedented even in my life time.

How About a Massive Bottom-Up Jobs Program?
by ger [Subscribe] [Edit Diary]

Sat Dec 06, 2008 at 09:17:08 AM PST

President-elect Barack Obama’s announcement this weekend of a massive top-down jobs and infrastructure program comes as no surprise, but I had a queasy feeling as I listened to him describe each specific example: build schools, bridges, roads, high speed internet. One word came to mind. Slow. Rebuild our nation’s schools? Glorious, of course. But how long will it be before the surveys of the existing school conditions, committee meetings, architecture review panels, competitive bids and environmental reviews give way to high numbers of workers actually building something? Can you see any impact in less than a year or more?

ger’s diary :: ::
What about roads and bridges, the shovels-in-the-dirt projects the governors were suddenly so enthused about? Again, planning, permits, delays, bidding. Months will pass, many millions will remain desperately unemployed.

And it’s all so heavily top-down. Not to mention, WPA. Guys building stuff. Anyone see a problem here?

How about a simultaneous mirror program, bottom-up, a huge jobs program, one that could be hiring people by the hundreds of thousands as soon as February? I’m thinking of the massive hiring power of the millions of small businesses, start-ups, and entrepreneurs in this country. What if we really had a Small Business Administration, not the existing huge and slow bureaucracy, but a streamlined U.S. Small Business Bank that would get dollars into the hands of the fastest hirers in the country? So the question is, how to get that money into the right hands without creating a huge new, slow bureaucracy?

Actually, they’re already out there in communities all over the U.S. The people most astute in understanding small business and entrepreneurs: the hundreds of MBA schools all over the U.S., many of which have entrepreneurship programs. Harvard, Chicago, Stanford, Wharton, USC and hundreds of others. Take that faculty and those graduate students, and start them out with give $50 million each. Their job is to invite, or go out into the communities and discover, companies that can use money right now to hire and to grow. We will have grass-roots hiring flourishing in every corner of the country. And it can happen really fast.

Every investment doesn’t need to be perfect, but they do need to move fast. Thinking like good portfolio managers of venture funds, and unlike the SBA, the faculty and grad student combine will be instructed to aim for one highly successful venture for each ten invested in. That in itself will be provide a decent payback for the taxpayer-investors.

But what about the side benefits: a thousand entrepreneurial lights will give birth to hundreds of thousands of jobs, ma and pa businesses will get a chance to grow, and the private sector will be hugely strengthened coming out of this deep recession. Without this bottom-up initiative, all we will have produced will be a massive, mostly one-time investment, with little new technology to show for it, and no development of small business and entrepreneurial skills to show for this huge opportunity for learning.

A new U.S. Small Business Bank. Money directly to those who can hire best, hire fast, and create long-term wealth. It’s what a good community organizer might come up with.

It is true that electronic credit can be made from literally nothing. Adequate numbers of credit worthy borrowers cannot. The nonlinear collapse in US employment is the economic reality of the US consumer and debt driven economy. The ongoing historical nonlinear positive feedback implosion will unsettle the world. Bankers and financial institutions having first use of the congressionally approved electronic credit will easily find ways to greatly increase their percentage wealth as asset valuations plummet to a level commiserate with the collapsing asset over supplied real economy. This exact nonlinear scenario has been predicted: //www.economicfractalist.com/blog/?p=4

Numbers mean less than emotion. If I want to organize a neighborhood program, i need enthusiasm. If I can create motivation, I can get every house in the neighborhood to go along with me. (i hope none of them read this.) I can do it even if I am not really very enthusiastic about it. The time it will take is in direct ratio to the speed at which I can motivate the number of people I need.

I can gather a crowd around a store window in five minutes so large that you can’t get through to see what happened, if I say that I see Jesus or the Virgin Mary in a potato chip. And many won’t leave until they see for themselves or until I eat it.

Motivated people can make remarkable things happen quickly. How long does it take to organize a fraternity party?
Measure that in minutes, at most.

Obama has already started to change things. He gets it. We will, in fact, need every single one of those 2.5 million jobs just to get back to normal, back to 6% by that time.

It will be a bottom-up philosophy for a change and despite the fact that there are no sophisticated economic theories to support it, it will happen. It happens on a micro level every single day.

People will pull together. The Doomsday scenarists, those whose functions were to help turn the country over to a small group of people, are all about to be doomed themselves. Many have already been told to pack their bags.

Shock and awe has done it again. This time the country has finally been shocked awake, ready to take action. This is a beginning, not the end.

Mathemematically, I suppose it depends on what baseline you choose as an employable workforce. Comparing today’s unemployment rate with 2006’s “full recovery” at 5% unemployment and 63% EMRATIO, I get a current unemployment rate of 7.1%.

But if I compare to the Pre-Bush era in 1999 with 64% EMRATIO and 4% unemployment I get a current unemployment rate of 8.2%.

They’re SWAG’s, of course, based on my memory of the reported unemployment rates in the two eras. Still, it illustrates how expectations of what “full employment” means can affect how we determine unemployment rates and how the health of the economy can be interpreted arbitrarily.

As far as “falling off a cliff”, I notice that the derivative of the EMRATIO at the beginning of 2008 was smaller than in the 2001 recession, but in the 2d half of 2008, the derivative is significantly greater. Could plotting a second-derivative of this factor give us some insight into future trends? Performing that analysis over the last 75 years might be an interesting study for a Graduate student to undertake (if it hasn’t already been done before, of course).

So does Bush in fact win the award for being the first President since Hoover to end his term with fewer citizens employed than when he took office? Clearly he’s going to win “first President to preside over declining wages” in an awfully long time…

I didn’t have the official name of that measure – thank you. I suspected the jobs situation looked like this. I think I would rather have been wrong.

It does bring up a point about the so-called recovery we had in 2002-2003. Many politicians and economists touted the productivity of the American worker at a time when executive pay went up drastically but the American worker’s wage stagnated. Many of those same politicians and economists seemed to be against any effort to improve the wages of these much more productive workers. Something for nothing seems to have been the order of the day.

You were and are (considerably!) better than that, for which I am grateful.